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Tesla Semi

Discussion in 'TSLA Investor Discussions' started by jhm, Jul 25, 2016.

  1. jhm

    jhm Well-Known Member

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    Heavy and Tractor-trailer Truck Drivers : Occupational Outlook Handbook: : U.S. Bureau of Labor Statistics
    Here's some stats on trucker pay.
    1.87M jobs in US
    $42,480 median annual pay
    $20.42/hr median hourly pay

    Aggregate wages is about $80B, adding in another $80B for benefits and other payroll overhead gets us to $160B. This gives us a rough sense of the market size for autonomous driving in the US trucking industry. Suppose that autonomous driving were to capture a 1% share of this market. That would be about $1.6B in annual profit without fundamentally shifting the economics of trucking that would cause margin compression. The first entrants to the market with this technology have the potential to gain a few points of very profitable market share.

    Let's look at this from a ground up perspective. Tesla makes a semi that it could sell for $180k and get a nice profit. However, this can also be used as a platoon follow on vehicle with nearly no driver cost. So AI in the truck earns about $40/hr. Suppose the vehicle is on the road 75% of the time. The other 25% is charging, maintenance, loading or waiting. That is about 6570 hours of operation per year, a driver savings of about $250k/yr. Suppose the truck has a working life in excess of 20k hours (1M miles / 50 mph). So the truck has a driver savings potential in excess of $800k as a follow-on vehicle. You still need a pilot vehicle until laws allow fully autonomy. The pilot driver would likely need to be paid above scale. So a platoon of 3 could save about $500k per truck over a 3-year warranted life of the vehicle.

    The point that I'm getting to here is that it make little sense for Tesla to sell the truck for $180k and miss out on earning $500k in driver cost savings. This is especially true in the early stages of technology deployment. As the tech eventually saturates the market, that $500k savings gets driven down to practically nothing, which is also what kill off most trucking jobs. But early on in the disruption, Tesla could enjoy some pretty extraordinary profits by NOT SELLING semi, but rather by operating its own trucking company. A fair value for the Tesla Semi with autonomous follow on technology is about $1M per truck. They would be foolish to sell it below $200k.

    I think this is why Elon is downplaying the Semi and talking about bringing a pickup truck to market first. The Semi Trucks are simply too disruptive and worth too much to put them up for public sale.
     
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  2. 9837264723849

    9837264723849 Member

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    Why should we consider this related to the Semi project and not a better way to manage Tesla's deliveries? I understand the benefit of owning truck companies to deploy a fleet of (autonomous) Semi but I'm not sure this is Tesla's current strategy.
     
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  3. LCR1

    LCR1 Member

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    Depends on how much money they want to make of if they want to venture out that way.
     
  4. AZ Desert Driver

    AZ Desert Driver Rare combination

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    So what I read here is that Tesla bought a trucking company....a company that deploys trucks to haul goods. They did not buy a truck manufacturing company. They were having difficulties getting their product (model s,x,3) delivered by the existing supply of truckers. I presume there is some coordination /scheduling/ fleet management outfit that did not deliver sufficient capacity to Tesla to keep Tesla happy. I don't know if there was simply insufficient capacity, or if there was some nefarious conspiracy to interfere with Tesla's goals. So What Would You Do? Buy you own trucks to remove the ability of others to limit your business.

    So now they can schedule deliveries at Tesla's time and not have to compete with others schedules. Nothing here that requires them to rebuild the newly acquired fleet into battery powered semi's. They simply pulled the thorn out and obtained self-control. Just like they try to make as many parts and components in-house as possible.
     
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  5. jhm

    jhm Well-Known Member

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    I think Musk was being a bit careless with his tweets. He should not have said that Tesla is buying trucking companies. Acquisitions signal a strategic shift. Sure there is logistical value here, but merely contracting with trucking companies can deliver the same logistical value without the risk holding equity in a trucking company.

    So the question we should be asking is why does Tesla want to own equity in trucking companies. I would argue that, when the full value of owning a Tesla Semi is on order of $1M and can be built for less than $200k, Tesla want to own that full value. It also buys Tesla the opportunity to perfect their technology and manufacturing process and build out a substantial Megacharger network all prior to offering public sales of the Semi. This gives Tesla a significant lead on all the competition.

    I believe it is in the interest of Tesla not to reveal details of this strategy at this point in time. The best cover story is that they are just trying to solve logistical problems while the Semi is in deep development. And oh by the way, Tesla wants to bring pickup trucks to market first. So all the media attention can be diverted away from the Semi and hype up the Pickup. Also many of the financial details can be hidden in financial reports. The risk of intense media of media focus on the Semi is that it will be fodder for shorts, it will inform competitors about many details, it will invite political backlash around the threat of autonomous vehicles to trucking jobs (about a million jobs could be lost over next ten years), and finally it will distract Musk and management to deal with media drama. Are there any benefits to this media attention? Most of that benefit comes from products aimed at consumers, Model 3, Y, Pickup and Roadster. Do investors need to be told? Nah, we can figure it out if we're attentive. So I don't see a favorable cost/benefit for hyping up a Tesla Trucking strategy. This is also why I'm posting in this thread instead of the Market Action thread. The media watches market action.
     
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  6. mongo

    mongo Well-Known Member

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    It sounds like you are talking general shipping.
    Tesla bought automobile hauler trucks/ company to reduce the shipping bottleneck and increase cash flow.
     
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  7. jhm

    jhm Well-Known Member

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    Of course, that's just the beginning. How is Tesla going to build up a Megacharger network before customers have 100k Semis on the road?
     
  8. mongo

    mongo Well-Known Member

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    The semi roll out will be very coordinated with the purchasers as regards routes. A much different setup than general consumers who have varied places they want to go.

    Start with 200 mile max each way runs with chargers at the central warehouse.
    Then expand to 400 mile runs with chargers at the warehouse and the destination. (also doubles charging capacity for 200 mile routes)
    Then add more routes with Megachargers on the way.

    (While adding solar to all the roofs and possilby parking lots)
     
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  9. jhm

    jhm Well-Known Member

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    Yes, that is how many of us have envisioned it. But now I see an alternative. Tesla can operate its own fleet as production slowly ramps. Tesla has it's own need to establish complete routes covering much of the US interstate system. This is needed just to do vehicle delivery. Tesla Trucking can deal with the growing pains this rollout would entail. Once Tesla is building more tractors than it can use internally, it starts selling to the public. But at this point, the charging network already covers most well traveled routes. This situation enhances the value of the Semi to all potential buyers because they do not need to wait for significant infrastructure to roll out. So I think this would be a very strong entry point for Tesla into that market.

    Remember the Musk said that the question was not really about when production would begin, but when production as significant volume would begin. While Tesla is producing fewer than 50 Semis per week, they can probably absorb them internally. Below that level they are worth much more to Tesla for their own use than as products to be sold to customers, especially if the Megacharger network is not built out. Indeed the value of the trucks to customers increases as the network grows. So eventually you get to a point where the value of truck for internal use by Tesla falls below the value of that truck to a customer. So it makes sense to wait until that crossover happens. Both ramping up volume of production and rolling out the network move in that direction. The question is how quickly does Tesla gets to that crossover point. 100 semis per week, 300 per week, 1000 per week? The longer they can wait, the more built out the network will be.

    So the thing that enables them to wait longer is to buy up trucking companies that continue to server multiple clients. This means they can make internal use of a much bigger fleet of trucks than what would be needed to distribute Tesla cars and move supplies to factories. Hauling freight from other clients also helps to assure good utilization of assets both trucks and charging network. This fleet can keep growing as Semi production ramps up. Eventually this will start to impact the economics of the trucking industry. It will become obvious that the only way to stay profitable as a trucker is to do what Tesla Trucking is doing. At that point, Tesla Semis become enormously valuable to the competition, they may be willing to pay $500k per semi just to avoid becoming less profitable without it. Meanwhile the value to Tesla has fallen from say $1M per truck down to $500k per truck, so Tesla becomes indifferent to selling trucks or retaining them for their own use. Basically Tesla would be selling a turn-key business model. Not only is Tesla selling trunks but they are selling charging and maintenance services too. How do you get to $500k with a Semi listed at $180k? You sell $320k worth of software subscription, charging and services over the life of the truck. To make that proposition work, Tesla needs to have the charging and service network mostly in place. Also autonomous driving software needs to be on some sort of subscription, which is like paying a drive 20 to 40 cents per mile. So a big chunk of the value to Tesla of selling a Semi will come after the purchase. So this puts Tesla in the position of setting up a bunch of capital upfront, to make it back over time. The turn-key approach, however, will lock in a long-term revenue stream addressing a broad spectrum of the total trucking market.

    How they enter the market will impact just how much revenue share they can lock in. Rushing to put trucks in the hands of customers before the network is built out could compromise just how much of the fuelling revenue they can capture. If done prematurely, customers will develop their own infrastructure and may never need much of what Tesla later develops. So this depends on how much Tesla wants to be in the charging business, but this could be a huge opportunity for Tesla Energy. Moreover, every Megacharger location can also host Supercharging too, so this has implications for Tesla's auto business. So I envision a very integrated strategy here for Tesla. It's not just about put trucks on the market as quickly as possible. It's about a whole EV ecosystem for freight. The best way to develop all of those interconnections is to actually operate a trucking company and solve every challenge along the way.
     
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  10. AZ Desert Driver

    AZ Desert Driver Rare combination

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    jhm makes a good case....but I was thinking that the Mega charger system would be expensive, so it would be better if the purchaser of the semi also buys its own mega charger. Kinda like I bought my own 14-50 when it was time.
    Is there a case for both (jhm plan) AND letting customers put in their charger- with some form of sharing option to friendly competitors at some agreed cost.
     
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  11. adiggs

    adiggs Active Member

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    I figure one dynamic we'll see a lot of - the bigger customers will put in their own chargers at their own distribution centers / parking lots. So early on, the routes they'll drive will be out and back so all charging happens at "home", or center to center with all charging happening at their own distribution center.

    That will be pretty restricted, but will still support getting trucks into service and companies getting experience with them (including Tesla).

    And will pretty naturally lead to the mega charger build out from there.

    Pretty sure that at 7c/kWh, big businesses will be able to get their electricity cheaper than that, so better to charge at "home" than on the road when that's a reasonable option.
     
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  12. LCR1

    LCR1 Member

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    #1932 LCR1, Dec 10, 2018 at 6:10 PM
    Last edited: Dec 10, 2018 at 6:17 PM
    Charging at '' home'' would work for round trip or point to point, like the gigafactory to fremont. an you could install a supercharger to do that. However if you want to make a road trip you need a super charger in the car and a mega charger for the truck. So if anyone wants to make longer trips then Mega chargers will be required and a trucking company isn't going to pay for it. Someone will and they will charge the truck user for the juice.

    They would also probably uses urban chargers or something no as fast as supercharging but enough to charge the truck over night. The reason for this is commercial electric rates are based on usage and also demand. So pump up a supercharger at 120kw and that’s a much higher demand charge than an urban at 72kw not even double the power but it could be over double the cost to run a super vs an urban. So basically you want to charge with as little power as possible but still get the job done when in commercial power.

    The other way around this is the battery booster and most likely what the mega charger will do. You’ll have battery’s charged from the grid or solar, doesn’t matter, and they will provide juice to cover the peak of the charging so you could be charging at 120kw but 60k is coming from the batteries and 60k from the grid. This reduces the demand charge and reduces overall power bill. Then when the truck is done charging you have a constant power from the grid charging the batteries back up.
     
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  13. jhm

    jhm Well-Known Member

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    Very much agree. 7c/kWh is going to seem pretty cheap at first when compared with buying diesel. Demand charges will make home charging more expensive for grid power. For example, Georgia Power offers commercial power at 9c/kWh plus demand charges of $20/peak kW per month. So charging at 300kWh at home would cost a company $6000 per month. This could be reasonable if you were running 50 trucks. 50 trucks at 400kWh per truck per day would be 600 MWh per month, works out to 10c/kWh. But if just running 5 trucks, this is works out to 19c/kWh. So doing really high power charging at "home" only makes financial sense if the fleet size is sufficiently large. Note also that charging 50 trucks at once at 300kW total is just 60kW per truck. With this kind of power you could charge one or two very quickly at a time, or a large bunch at a time more slowly.

    Now inspite of the potential for charging at "home" may in many areas prove more expensive than Tesla's offer of 7c/kWh, I do think that fleet operators will want to do it for the sheer logistical advantages of doing so. Paying an employee to charge a truck at a Megacharger will tip the economic scale of just plugging it in at "home" (requiring very little labor). That's one thing if driver needs a break on the middle of a long day, but for "over night" charging it makes more sense to plug in where parked.

    I think logistical challenges will be the largest impediment to adoption early on. A lot of things will need to be rethought by fleet operators, and they will need to invest in their own infrastructure. This is why I think that Tesla will need to pioneer these new logistics first, and having a substantial Megacharger network up and running will be a needed bridge before fleet operators have the scale and infrastructure in place for themselves. Ultimately there is going to be huge build out of charging resources.

    Lest we worry that all this may be too costly, remember that the 50 truck fleet the soaks up 600MWh per month would otherwise be consuming some 65k gallons of diesel or about $165k per month. Getting this down to just $42k per month for Megacharging is a huge savings.
     
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  14. neroden

    neroden Model S Owner and Frustrated Tesla Fan

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    The point about how demand charges work leading to *high usage fleets* having a better economics for the electric truck than *low usage fleets* is interesting. I hadn't thought of that. So I guess we're going to see "top down" adoption, biggest fleets and heaviest-use routes first. Hmm.
     
  15. jhm

    jhm Well-Known Member

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    Ah, I forgot to correct a mathematics mistake. A 50 truck fleet chewing through 400kWh per day per truck is going to need more than 300kW of charging. Specifically, if such a fleet were constantly charging, it would need 20,000kWh per day or 834kW. But more realistically there would need to be a little more slack here. So maybe a fleet of 50 would need 900 to 1200 kW of charging. So the demand charges are adding about 3 to 4 cent per kWh to the 9c/kWh energy cost. Put another way, a fleet of 12 trucks would be just as expensive to charge on 300kW as fleet of 48 trucks on 1.2MW on this particular commercial rate plan.

    The problem here is that the demand charges are very high. The only way to substantially reduce the impact of demand charge is to move toward a constant rate of charging for the whole fleet. That is the demand charge pricing structure rewards creation of base load demand. Increasingly this is stupid idea for utilities. What is much better for utilities is a variable pricing structure that allows commercial fleets to trade off its flexibility in charging demand for lower prices. Specifically, if rates were a simple markup of wholesale prices, then commercial fleets would be helping the whole grid absorb wind and solar power when it is most abundant and to avoid the need for peaker or backup power.

    Think about the duck curve in California. Increasingly, the cheapest time for wholesale power prices is midday, when solar power is at its peak. The most costly time is a few hours in the early evening starting near sunset. It would make sense for trucking fleets to do most of their charging mid-day, directly from solar power. Likewise, freeway congestion is lowest at night. So I could see a highly autonomous fleet operating on a mostly nocturnal basis. Travel at night; Unload, charge and load during the day.

    Nocturnal trucking would be an adaptation to solar power. If utilities insist on demand charges for commercial charging, they will utterly miss out on this important adaptation. Trucking fleets can secure their own distributed solar power resources apart from the utilities. They can also use surplus battery capacity to assure that any residual demand for grid power minimizes demand charges. So the utility will get exactly what its peak demand charge plans incentivize: base load. Meanwhile, nocturnal trucking fleets will enjoy really cheap solar power for the bulk of their charging needs.

    So how can Tesla deliver charging at 7c/kWh? They obviously will not be using a commercial rate plan like what Georgia Power offers. What would serve them well is direct access to the wholesale power markets. They need to be at a scale where they can buy when grid power is cheapest in the wholesale market. They can firm this up with their own stationary storage and provide some services back to the grid. Now this is a bit of a redundancy because Tesla Semis will essentially be a fleet of grid batteries that happen to be on wheels. Why put power into a stationary battery just to put it latter into a semi battery if you can avoid this? So imagine that Tesla minimizes the use of stationary batteries. Rather it maintains a fleet of standby Semis that opportunistically soak up the cheapest power available. This fleet then does low cost nocturnal trucking.

    So what I am envisioning here is that Tesla positions itself as a Trucking company and as a truck charging network with its own solar, wind and storage resources. The Tesla Trucking company not only serves the freight needs of Tesla manufacturing but it is a massive rolling grid battery needed for firming up large scale charging. Basically, most of the trucking industry will want continue on with logistics that are comparable to what they currently achieve with diesel semis. They will not be inclined to reorient their whole business model to optimize the cost of power. Balancing the grid is not something they understand or would even want to do. So Tesla Trucking steps in to be the nocturnal fleet that benefits from the arbitrage between solar/wind power and demand for charging and other grid services. This is the arbitrage that makes Tesla truly an energy company.

    What a power market highly supplied with wind and solar most needs are export markets for surplus. Grid storage is only a partial solution because stored power come right back into the power market at some point. When there is substantial overgeneration, the surplus needs to find a true export market. Power to gas technologies provide one such export from surplus power to the gas markets. Excess power to trucking could also fulfill a crucial export function. Initially, this enables electric semis to compete with diesel semis for freight. So the capacity the oil industry to store diesel and surplus capacity in the diesel trucking fleet get exploited as means to seasonally balance the grid. As time goes on, the economy adapts around the reality that trucking costs are lower in when the grid is seasonally oversupplied with renewables. So longer term the seasonal movement of freight acts as means to provide seasonal balancing to the grid itself. I seriously doubt that any trucking company out there understands the potential here for trucking to help balance the grid. Tesla alone is uniquely positioned to see this opportunity and to seize upon it.
     
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  16. neroden

    neroden Model S Owner and Frustrated Tesla Fan

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    OK, so you already know my views on "driverless trucks" -- they won't be good enough to be commercially significant for at least 5 years, if not more.

    The way truck usage works, trying to use Semis to store power isn't really going to substitute for having Powerpacks at the Megachargers. I agree that trucking will go nocturnal for the most part.
     
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  17. jhm

    jhm Well-Known Member

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    A fleet of standby trucks is not a full substitute for Powerpacks or Megapacks because, as I envision it, they would not be used to charge other trucks. But what they would be is an inventory of charged trucks ready to go as needed. This is comparable to the idea of battery swapping where you have an inventory of charged batteries ready for swap. The difference, of course, is that you don't just swap the battery pack, but the whole semi tractor. Since most of the cost of a BEV semi will be its battery pack and you avoid specific battery swapping costs, I would expect tractor swapping to be more economical than pack swapping.

    I also think that "tractor swapping" becomes more feasible if you have one large operator (read, "Tesla Trucking", "TT") that runs the whole service. Imagine for example that you want to ship a trailer of goods from LA to NY. You work with a local trucker to get it to a TT hub. Drop the trailer there. A Tesla tractor picks up the trailer and follows a platoon out to NY hub. A local NY trucker picks it up at the hub and delivers to final destination. In principle, this is what intermodal rail would also do. What Tesla Trucking would provide is faster service than intermodal rail at or below comparable to cost. (Neroden, I know you hate the idea already.)

    What this sets up for TT is a flow of freight that needs to move across a network at low cost and fast speed. The inventory of TT tractors is optimizing the cost of charging and availability at each node. There is network optimization system that dynamical routes freight where each load needs to go. For example, if it is snowy in Denver but the windy in OK City, then the network is likely to send more loads across I-40 than through I-70 so as obtain lower charging cost along the way (if not also to avoid poor road conditions). In more subtle ways the system can do (tractor) inventory management at each hub.

    Oddly, enough such a network could help reduce the need for long-distance power transmission, though it does so by exploiting the interstate highway system which is more expensive to maintain. In any case, the US is a patch work of RTO/ISO grids with very limited ability to trade surplus renewable power, so to the extent that the transportation system becomes electrified it provides some means to trade off load between ISOs that are oversupplied or undersupplied by local renewables. Trucking and railroads could provide a critical nexus in this regard. So there is network value in having grid storage on wheels.
     
  18. neroden

    neroden Model S Owner and Frustrated Tesla Fan

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    #1939 neroden, Dec 13, 2018 at 9:55 PM
    Last edited: Dec 13, 2018 at 10:05 PM
    I believe it fundamentally depends on whether it's cheaper to build stationary Powerpacks + Megachargers or mobile Semi tractors.

    I think stationary sites will actually end up being cheaper, but I could be wrong. My reasons are based on the high expenses in the truck suspension, body, bulletproof glass windows, and user interface, all of which are totally missing in the stationary installation, and the greater complexity of the assembly line (more labor-intensive, slower) for a tractor than for a stationary box.

    If I'm wrong, it will be because sitework to pour concrete pads, and permits related to it, is ludicrously expensive.

    So, suppose a Megacharger + a Powerpack restore a Semi from "depleted" to "fully charged" in an hour. If it's cheaper to build those in several key locations than it is to build enough reserve Semis to store in each location, it makes more sense to build one, because it creates "virtual additional Semis", if you see what I mean.

    There will probably be a bit of each. I suspect it doesn't make sense to have a large reserve fleet of semis. A small reserve fleet will probably still be used, though, to eliminate the one-hour "charging time wait" issues.

    But I think Tesla will minimize the number of "reserve Semis" and maximize the stationary power installations. In addition to my belief that this is cheaper, the stationary power installations have other ways of profiting (see the South Australia battery) and the semis basically don't.
     
  19. neroden

    neroden Model S Owner and Frustrated Tesla Fan

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    It's not possible to provide it at comparable cost to rail *unless*...

    which puts a thumb on the scales by subsidizing trucks at the expense of unsubsidized rail. Like we've been doing for a century in the US for No Good Reason.

    If you fund the railway mainline tracks same as the interstate highway tracks, rail is cheaper, period. This is first principles physics stuff, Musk can't change it. Of course he could make battery-electric locomotives.
     

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